An independent review of oil output and exports in Iraq's semi-autonomous Kurdistan region for the first three months of 2022 showed what is at stake in a row with Baghdad over sovereignty.
The quarterly report, by accountancy firm Deloitte, showed the Kurdistan Regional Government (KRG) banked over $1bn from oil sales, the highest for any quarter in three years.
Exports, which mostly go by pipeline to the Turkish port of Ceyhan, were sold at an average $86.73/bl, the report said. But it highlighted a downward trend for exports from the beginning of the year, from 12.43mn bl in January to 11.30mn bl in February and 11.19mn bl in March. The dips in February and March coincide with a ruling by Iraq's supreme federal court that deemed the KRG's oil and gas law unconstitutional, since when the federal government has been taking steps to seize control of oil production and exports in the northern region.
Deal drop
Signs of strain are already evident that could further affect oil sales and revenues in the second quarter of 2022.
US oil services firms Schlumberger, Baker Hughes and Halliburton have begun liquidating and exiting tenders and contracts in Iraqi Kurdistan to be in compliance with the court ruling. And the diplomatic spat already looks to have prompted some refiners to reconsider whether to continue buying KRG-marketed Kirkuk crude, narrowing the pool of buyers for the grade.
Shipments to the core Mediterranean and northwest European markets fell by nearly 8pc from May to just under 360,000 b/d in June, when regular Mediterranean buyers in Spain and Sardinia failed to take any June-loading KRG Kirkuk and shipments fell to Italy and Israel.
Shipments of Kirkuk to Spain were around 40,000 b/d in the January-May period and close to 45,000 b/d last year. The grade has not sailed for Sarroch, where Italy's Saras operates a 300,000 b/d refinery, since March. Shipments to Italy declined by 12pc on the month to 113,000 b/d in June, the lowest since January. KRG Kirkuk loadings to Trieste, Italy, dropped by 25pc on the month to 53,000 b/d in June. Crude delivered to Trieste can move to refineries in Germany and central Europe through the 900,000 b/d Transalpine pipeline. Shipments to Israel fell to 10,000 b/d in June from close to 20,000 b/d in May.
The drop in deliveries was offset by a rise in exports to Greece, which surged to 233,000 b/d in June, the highest since Argus tracking began in 2016. The sharp increase may be linked to efforts to cut imports of Russian Urals ahead of the EU embargo on seaborne imports from the country, which will take full effect by the end of this year.
Deloitte's report showed that $294mn and €310mn of the KRG's oil revenues remain held in bank accounts in Lebanon, due to restrictions on movement of foreign currency out of that country.
